We are thinking of buying a dive shop. We have no retail (or dive indistry) business experience. We will be meeting with an attorney on Monday but he admittedly has no dive industry experience. So - in the unlikely event that this net I'm casting happens to catch a generous attorney with a couple free moments - any special caveats for us ? For example - how is past liability handled ? If the shop has been in business many years is the new owner liable for all of the certified divers of the past ? What about records for the previously certified divers ? We would certainly want to preserve the name of the business but do we want to start our own new Corp ? Any adice appreciated...
Any scuba savy attorneys out there ?
- Thread starter FiveCats
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boomx5
Contributor
FiveCats:
PM "DepartureDiver"...he's an attorney and may be able to help.
FiveCats:
H2Andy, who is a mod on this board is an attorney, and may be able to help!
miketsp
Contributor
FiveCats:
.. that's an oxymoron.
:rofl: :lol3:
triton94949
Guest
BigJetDriver69:
FiveCats:
H2Andy is an attorney, but you also need to find out if he is familiar with the particulars of your state. Law varies from state to state. Some of your questions are general, and even I can answer them, however.
Your local lawyer will explain to you what you are buying. It will either be shares of stock in a small corporation which owns the assets of the store and the lease, or else it will be the actual assets themselves plus the lease for the ground rents.
Your lawyer will probably recommend to you that you set up an all new small corporation of your own, and put your cash into that corporation, and get a small business loan for that corporation, and even refinance your house and put the proceeds into that corporation as a shareholder loan.
Then you can use the new corporation's cash from your funds capitalization to buy the assets and the lease of the former owner of the dive store.
That is your safest bet against any prior years' liabilities for certifications of the past and injuries that might come of them.
For Federal (and sometimes also State) tax purposes, you can make an "S-Corporation Election" which eliminates the double-tax on corporations for small businesses. That allows you to be a corporation for legal purposes and not be required to pay corporate taxes. You then get to deduct the losses of the business on your own tax returns, and if the business is profitable, you don't pay the corporate double tax either.
You can "buy" the name of the business as well, without incurring the past liability. If it is a good name and a good store, the name is valuable.
One of the most valuable assets of the business is the list of customers and their mailing addresses. You will want to send out mailings to them, offering sales, and advertising the ownership change, and any new gear that you will be offering, and vacation trips.
Beware of being offered the shares of stock of the present corporation that owns the dive store, if it is owned by a corporation. Buying those shares is the most dangerous thing that you could do.
Generally speaking, you want to buy assets only, not subject to liabilities, and not shares of stock in a corporation either.
Once you set up your own new corporation, and put your cash into that, and get an SBA loan on behalf of that corporation, then you can contract as an officer of that new corporation with the old owner, and buy his assets, his lease, and his business name, and make any other changes that you want. That is when the fun begins.
You will need to select high end gear and low end gear, equipment that rich people will want and can afford, and equipment that non-rich people can afford. My own suggestion would be ScubaPro and Mares. But I have seen stores do Zeagle and Oceanic, or Atomic and Tusa. The same with drysuits and wetsuits. The same with dive computers. The same with soft weights and hard weights. Don't feel locked into the name brands that the current store is offering. Now is a good time for you to sweep and clean out everything in their inventory. You can get a charitable deduction on your taxes by donating stuff you don't want to a local university that teaches scuba.
The same is also true of training agency affiliation. NAUI, PADI, SSI, TDI-SDI, IANTD, etc will all love to become your new standard ensign.
If there is a local university that teaches scuba nearby, you can win valuable advanced students and customers by becoming associated with them, and supporting them with gear discounts. Students are poor, and by offering them discounts not otherwise available to the public, you can enhance your market. Students also become rich once they graduate, and if they stay locally for work, you will have a valuable source of customer growth from them.
You will make the most profit from your gear sales, as I am sure you already know. In second place will come vacation travel.
And congrats! As a store owner, you now become one of the "Scuba Gods." The training agencies will now listen to you, more or less, depending on which training agency you decide to go with.
Good luck.
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